Hi Guys,

I am looking for some advise and information. I would really like to purchase approx 4 buy to let properties over the next 5 years; the purpose of this is essentially my pension.

Does anyone have any tips on firstly purchasing properties and secondly (the thing that confuses me the most) is the accountin aspect of it inc tax.

I assume rental income is treated as your income on your tax return however how can the mortgage be offset against this.

E.g. 50k flat with 45k mortgage. Any advise or information would be most useful.

thank you


Last edited by RR8701 on 10th May 2012 8:31pm. Edited 1 time in total

you only pay tax on gross profit...
you would offset all cost against the income the rent provides.

so for example.

e.g. rental income for 300pm and mortgage was 250pm, leaving 50 pounds, the tax calculation would be on the 50 pounds gp ?

Have you had any mortgage quotes? The good old days of puting 5 or 10% down are long gone... For a buy to let you will probably have to put up 25% and there will probably be a charge of up to 1.5k and a higher interest rate.. Previously..
Vogue SE TD6
Defender 90 2.4
Defender 110 TD5
Vogue 3.5 EFI

Hi Mate,

Yeah I have looked into it and your right those good old days are certainly gone, I am generally working on the basis of having 30% cash of the value of the property.

Generally I have seen mortgages for 70/75% LTV and as you said the mortgage int rate is high however that is part and parcel of the buy to let mortgage world but I am aware of it and would take this into account with deciding rental income to charge

I have just bought one in Glasgow, a repo, there are so many to choose from which is kinda sad if you know what I mean.. But rents are so high it is worth doing... Previously..
Vogue SE TD6
Defender 90 2.4
Defender 110 TD5
Vogue 3.5 EFI

Very interesting, do you mind me asking how you came across the repo, was it just a listing or auction, could you pm me? if its being too nosey just feel free to say so.

Cheers

PS. your right it is sad but yeah much like you i would like to get on the ladder before its even too late unless your a millionaire, right now we are in a double triple dip hell hole and in some way I would like to take advantage for my own future security.

Done  Previously..
Vogue SE TD6
Defender 90 2.4
Defender 110 TD5
Vogue 3.5 EFI

You can only offset interest payments against tax and not the capital payment part of the mortgage. Costs can be offset against rental income or larger ones against capitol gains 2010 3.6TDV8 Stornoway Grey/ Black interior - gone
2005 4.4V8 (M62) Bonatti Grey/ Parchment interior - gone
1998 4.6HSE Blue/ Cream interior (can't remember exact colours) - gone
1977 White - gone (should have kept)

If you're looking at that many properties, might be worth considering starting a limited company to use as a management vehicle?

Would certainly help limit personal tax exposure but might make the purchases more difficult depending on your finance situation...

Buy to let mortgages are still one of the easiest mortgages to get as long as you earn in excess of £25k, can pass a credit check and obviously have the relevent deposit level. The more you put down, the better the rate. Most deals will look for a rental yield of at least 125% of the mortgage payment but a good idea is to look at similar local properties to guage local rates. Althought the surveyors comments are the only factor a lender will take into account for appraisal of application.
As an aside you need to think of whether you are aiming solely for capital appreciation on disposal or as a longer term income stream post retirement. Depending on which you prefer, a great idea would be to try & get the mortgage on repayment if the rental income can justify it. I could gab on & on about this but I need another beer (i'm allowed acouple on Thusdays )
Am happy to talk you through the process if needs be on a no fee basis as you are a forum member.

I was also thinking of the buy to let idea, and was advised it may be better/cheaper to re-mortgage my own house to raise the money Any financial people out there agree or disagree.

Really does depend on your circumstances I'm afraid, without a private chat ,I cannot give specific advice on an open forum.At the end of the day there are pros & cons of your advised route.

By remortgaging your own property it allows you to claim tax relief on the interest of that mortgage as long as you can show it is for "commercial" reasons. We paid ours off and 2 months later (proves we did not need it anymore) remortgaged to buy rentals and have been claiming tax relief for the last 11 years 2010 3.6TDV8 Stornoway Grey/ Black interior - gone
2005 4.4V8 (M62) Bonatti Grey/ Parchment interior - gone
1998 4.6HSE Blue/ Cream interior (can't remember exact colours) - gone
1977 White - gone (should have kept)

RR8701 wrote:

so for example.

e.g. rental income for 300pm and mortgage was 250pm, leaving 50 pounds, the tax calculation would be on the 50 pounds gp ?

correct...

you would be better to show no profit..... set your rent at your costs...
i know it wont provide an income...
but it will get your property paid for you tax free...over the time of the mortgage...